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Sequential Formation of Coalitions through Bilateral Agreements

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Abstract

We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any Subgame Perfect Equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently patient.

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  • Inés Macho-Stadler & David Pérez-Castrillo & Nicol? Porteiro, 2002. "Sequential Formation of Coalitions through Bilateral Agreements," UFAE and IAE Working Papers 515.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:515.02
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    1. Maria Montero, 2023. "Coalition Formation in Games with Externalities," Dynamic Games and Applications, Springer, vol. 13(2), pages 525-548, June.
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    12. Diamantoudi, Effrosyni & Xue, Licun, 2007. "Coalitions, agreements and efficiency," Journal of Economic Theory, Elsevier, vol. 136(1), pages 105-125, September.
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    Cited by:

    1. Katharine A. Anderson, "undated". "Group Formation with a Network Constraint," GSIA Working Papers 2012-E49, Carnegie Mellon University, Tepper School of Business.
    2. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1229-1257.
    3. Juan Vidal-Puga, 2004. "Forming societies and the Shapley NTU value," Game Theory and Information 0401003, University Library of Munich, Germany.
    4. Vasconcelos, Helder & Fumagalli, Eileen, 2006. "Cross-Border Merger Waves," CEPR Discussion Papers 5601, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Coalition Formation; Bilateral Agreements;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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